Export Economies in Latin America

In the 1950s there emerged in Latin America an influential scholarly paradigm, later dubbed the “dependency school,” or dependistas, that emphasized Latin America’s historic insertion into the expanding global capitalist economy as a subordinate producer of primary export products for the dominant industrial economies of Europe and North America.

In contrast to the dominant neoclassical, or modernization, school of the period, which assumed a direct correlation between economic growth and national development, the dependency school emphasized the development of underdevelopment as an active process, pointing especially to Latin America’s historic export orientation as the prime motor of its progressive and continuing impoverishment.

Since that time, scholars have examined diverse aspects of the historic formation of Latin American export economies from the colonial period through the 20th century.

Special attention has been paid to the emergence of new export products in response to rising demand in the industrial world; the strategies pursued by emergent states to encourage production for export, especially taxation and tariff policies; the extent to which growing export production fueled the growth of states’ administrative and fiscal capacities and spawned economic growth in nonexport sectors; the deleterious consequences of export dependency in a boom-and-bust global market; and the formation of new social classes and related social dynamics set in motion by rising production for export.

Scholars broadly agree about the historic export orientation of Latin American economies and cluster into varied and often conflicting interpretive schools regarding what that export orientation has meant historically.

In the late colonial period, the Bourbon reforms imposed by the Spanish state were intended, in large part, to reinvigorate traditional export economies, particularly silver mining, but also including gold, sugar, indigo, cacao, and tobacco.

With independence of most of Latin America by the 1820s, chronic fiscal insolvency was one of the principal problems confronting the newly independent states. In response to perennially empty treasuries and populaces with few taxable resources, states devised a range of strategies intended to enhance their revenue streams, particularly the promotion of production for export.

These strategies promoting exports dovetailed with the desire of foreign investors and national elites for profits, and with sharply rising demands for industrial commodities and tropical agricultural products in consequence of the Industrial Revolution and urbanization in the United States and Europe. The result across large parts of Latin America was an intensification of the export-led model of national development.

The Coffee Revolution

The coffee revolution in Brazil, Colombia, Venezuela, Guatemala, El Salvador, Costa Rica, and elsewhere from the 1830s to the 1880s is often taken as emblematic of this emergent export-led model.

Especially after the 1850s, skyrocketing coffee exports provided these and other states with a valuable taxable resource, enhancing their fiscal and administrative capacities and permitting the further expansion of export-oriented physical infrastructure, especially roads, railroads, and port facilities.

In Peru, guano played a similar role, as did copper and nitrates in Chile; wheat and beef products in Argentina; tin, lead, and zinc in Bolivia and Mexico; bananas in the Caribbean Basin; and many other export commodities in the region’s nation-states.

Peru and Chile

The guano boom in Peru offers a paradigmatic example of these processes. Over the millennia, the many islands off the Peruvian Pacific coast had accumulated massive deposits of bird droppings.

Rich in ammonia, phosphates, and nitrogen, in the 1840s guano began to be mined and exported by a consortium of British, French, and Peruvian mining and shipping interests and marketed as a fertilizer in Europe and North America.

The age of guano lasted until the 1880s, after which guano deposits were largely depleted. The estimated 20 million tons of Peruvian guano mined during this period netted an estimated $2 billion on the world market.

The guano boom provided a ready source of taxable revenue for the Peruvian state while accelerating the formation of a new commercial class in Lima and beyond. Much of the profit went into conspicuous consumption among the guano elite and interest on government debt to European banking houses; the guano crash in the 1870s generated a fiscal crisis for the Peruvian state.

Similar in both its overseas markets and domestic effects was the nitrate boom in Peru and Chile from the 1830s to the 1930s. Used in fertilizers, explosives, and in various industrial processes, nitrates accumulated by natural processes in huge deposits in presentday Chile’s northern coastal Atacama Desert provinces of Tarapacá and Antofagasta.

In 1843 an estimated 16 thousand tons was mined and exported. By the height of World War I, in response to the huge demand for military applications, production reached around 3 million tons annually.

The nitrate boom not only provided an important source of revenue for the Peruvian and Chilean states but, along with guano, sparked a major war, the War of the Pacific, between Bolivia, Peru, and Chile.

In the war, Chile wrested from Bolivia its sole coastal province of Antofagasta—making Bolivia landlocked, as it remains to this day—and from Peru its province of Tarapacá. From the 1880s to the 1930s Chile was the world’s largest nitrate producer; by 1913 the mineral accounted for more than 70 percent of Chile’s total exports.

Copper began to be mined on a large scale in the 1840s and 1850s. By 1870 Chile supplied about one-quarter of the world’s copper, a commodity that saw sharply rising U.S. and European demand following the invention of the telegraph in the 1840s and electric light and power in the 1870s.

After a sharp decline in the 1880s and 1890s, copper production surged again in the early 20th century, comprising only 7 percent of the country’s exports by 1913 but over 80 percent by the early 1970s.

The effects on the Chilean state and society were complex. From the 1840s to the 1930s, with revenues earned from nitrates in particular, the state invested substantially in public infrastructure, education, and other government services, while periodic global economic downturns wreaked havoc with state finances and sparked a string of political crises and episodes of civil unrest.

Sprawling open-air nitrate and deep-shaft copper mining operations and their associated processing and refining facilities, owned mainly by U.S. and British capital, attracted a large wage labor force whose organized struggles compose a major chapter in modern Chilean history.

Argentina

In Argentina, the explosive growth of the meat and cereal industries in the second half of the 19th century enhanced the power of Buenos Aires vis-à-vis the interior provinces, facilitating the consolidation of the national state dominated by the port city while deepening dependence on European investment capital and markets.

Argentina went through several stages in the development of its export economy, from an earlier emphasis on sheep, mutton, and wool from the 1840s to the 1880s to the rapid expansion of the cattle and wheat industries after 1880, oriented overwhelmingly toward Europe. British banks and investors were key in providing the capital needed to build a network of roads and railroads connecting the interior provinces to Buenos Aires.

The invention of refrigerated steamships in the 1880s permitted vast quantities of Argentine beef to reach European markets. At the same time, wheat production soared. From 1872 to 1895 wheat production on the vast open grasslands, or pampas, increased fifteenfold; by 1895 nearly 10 million acres had gone under the plow, with annual exports exceeding 1 million tons and making Argentina one of the world’s leading wheat exporters.

In the 1890s the surging growth of the beef and wheat industries attracted an average of 50,000 mostly Italian and Spanish migrants annually, swelling the port city’s working class and generating a major transformation in the country’s class structure.

Most of the interior lands came to be owned by a small number of wealthy landowners, or estancieros, further sharpening class divisions. In the late 1880s this breakneck growth was accompanied by rising government debt, precipitating a major political crisis in 1889–90.

Overall, Argentina’s export orientation generated a national economy dominated by Buenos Aires and highly dependent on European investors and markets, a highly skewed landowning structure, and a vast and politically disfranchised urban working class that would play a key role in the country’s 20th-century history.

Elsewhere in Latin America

In the late 19th century, the skyrocketing European and North American demand for industrial minerals such as copper, lead, zinc, and tin generated similar processes in Bolivia, northern Mexico, Chile, and elsewhere.

In Bolivia, the expansion of tin mining after 1890 came to be dominated by a handful of oligarchic families, while the mostly indigenous tin miners earned the equivalent of pennies per day while working in exceedingly dangerous conditions, many dying prematurely from silicosis and other debilitating pulmonary diseases. By 1913 tin composed more than 70 percent of Bolivian exports.

The vast bulk of the proceeds from tin exports went into lavish consumption by the political elite and very little into education, public health, or other government services, while the country’s indigenous majority remained mired in abject poverty.

In northern Mexico, the years preceding the Mexican Revolution saw the rapid development of silver, lead, copper, gold, zinc, and tin mines owned by German, French, and U.S. investors, including the Guggenheim family, which had extensive investments in mining across large parts of northern Mexico (as well as Chile and elsewhere), and U.S. Colonel William Green, owner of the Cananea Consolidated Copper Company and the so-called “copper king of Sonora.”

The mining boom sparked the formation of an economically exploited and politically oppressed working class in northern Mexico that would fill the ranks of rebel chieftain Pancho Villa’s revolutionary armies and play a key role in the Mexican Revolution.

The banana boom along the Atlantic littorals of Guatemala, Honduras, Costa Rica, Panama, and elsewhere in the Caribbean from the late 1890s generated similar processes. Like Peru’s guano, Chile’s nitrates and copper, and Mexico’s silver and lead, the Caribbean banana industry formed economic enclaves within various national economies, oriented almost exclusively toward overseas markets and generating weak economic linkages to the national economies of host countries. As elsewhere, domestic industry faltered as national economies became geared overwhelmingly toward production for export.

In the 20th century, this historic dependence on exports continued to play a major role in economic, political, social, and cultural life across the southern parts of the hemisphere. Over the past decades, scholarly investigations into Latin America’s export orientation, and the varied effects of export economies in specific instances, have spawned a vast literature.